Semis: Street Encouraged by SIA October Chip Sales Data

By Tiernan Ray

Yesterday afternoon brought the release of semiconductor sales data for the month of October by the Semiconductor Industry Association, and the net takeaway for the Street was higher revenue, volume, and prices were an encouraging bright spot in a rather tough market overall.

Sales rose by 6%, year over year, in October in revenue terms, to $24.9 billion, while unit shipments rose 8% to 54.4 billion. Average selling prices fell 2%, year over year.

Wedbush Securities‘s Betsy Van Hees notes that the revenue rise was better than the 5-year average 3% increase, and that the unit number was above the average 2% year-over-year increase. Average sales’ decline was worse than the average 1% increase, but also above the month-to-month average decline of 6% for October.

Van Hees notes that the upside seems to have centered on memory chips, and DRAM in particular. DRAM’s month-to-month revenue rise of 2% was ahead of the average 6% decline, and the unit shipment number increase of 1% was also ahead of the average 4% decline. Prices also rose slightly, better than the usual 3% decline, month to month.

Other segments such as microprocessors saw dramatic declines, with processors slipping 25%, month to month, by revenue, though that, too, was above the average 37% decline.

Writes Van Hees, “While the macroeconomic backdrop continues to be challenging, we remain upbeat on the prospects for 2013.”

Wells Fargo‘s David Wong, reflecting on the news today, writes that while the 6% jump was “strong,” nevertheless “The three-month rolling average rose 2% month over month for the second month in a row, but this nevertheless is a weak number for this time of year, in our view.”

“The caution given by most chip companies for sequential declines in the December/January suggests to us that the SIA numbers will remain muted in the next 2-3 months.”

However, Wong also adds some observations from company reports and U.S. economic data:

Last week, October quarter earnings reports from a variety of broad chip companies such as ADI, Avago and Semtech showed continuing softness indemand with January quarter expectations in each case being for a sequentialsales decline of several percent. US durable goods data showed a continuingslight downward trend in technology-related shipments.

In related news, research firm IHS iSupplicut its outlook today for chip industry growth, projecting a drop of 2.3% in sales for 2012, following a 1.3% rise last year. That’s worse than a 1.7% decline projected back in September, and IHS’s 0.1% decline projected in August.

Things should get better in 2013, with 8.2% growth, the firm believes:

An extremely weak global economy resulted in poor demand for electronics. As a result, the semiconductor industry slipped from stagnation in the first half of 2012 to a slump in the second half. Still, one of the few silver linings is that the fourth quarter is expected to bring a mild recovery in year-over-year growth, setting the stage for a market rebound in 2013.

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